In India, currency forms a significant part of the money supply, even though we are moving towards Digitization. It was observed that many of the notes in circulation were soiled and mutilated and these were no more considered as a decent medium of exchange. Nobody wanted to accept these notes, however, if somebody acquired these notes while transacting, they wanted to get rid of them at the first available opportunity. The Reserve Bank of India (RBI) has Introduced clean note policy in 1999, asking the banks do not pass on the soiled, torn, and scribbled notes to the customer and deposit the same to the RBI. RBI has issued a directive under Section 35A of the Banking regulation Act, 1949, prohibiting the stapling of currency notes/packets.
The objective of the Clean Note Policy is to give the customers good quality currency notes and coins while the soiled notes are withdrawn out of circulation and issue only good quality clean notes to the public and refrain from recycling the soiled notes receive over the counter.
RBI’s Clean Note Policy
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